Mutualist Blog: Free Market Anti-Capitalism

To dissolve, submerge, and cause to disappear the political or governmental system in the economic system by reducing, simplifying, decentralizing and suppressing, one after another, all the wheels of this great machine, which is called the Government or the State. --Proudhon, General Idea of the Revolution

Here is one of the most important, the Real Estate Cycle (I've removed reference numbers to an accompanying chart in Pollard's post):

The economy depends fundamentally on the 'consumer' activities of taxpayers, and specifically on the willingness and ability of taxpayers to spend their money on real estate, taxes and user fees, and the purchase of (now mostly overpriced, imported) products. The spending on real estate drives up real estate prices, providing increased collateral to consumer lenders (4), allowing these lenders to loan ever-more money to taxpayers. This creates a self-perpetuating Real Estate Cycle that produces the Two Income Trap.

In an earlier post on the Two Income Trap, Pollard provided (among other things) this informative nugget of information:

Compared to 1978, the average American family spends (inflation-adjusted) 21% less on clothing today, 22% less on food (grocery & restaurant combined), and 44% less on furniture and major appliances than they did, although their (mostly-two-income) family take-home has risen 70% relative to the (mostly-one-income) take-home of the early 1970s. Where has the extra money gone? First and foremost to skyrocketing housing costs (up 100% on average, up to 600% in areas close to the best schools).

Another is the Campaign Funding Cycle, in which

[t]he taxes and user fees paid by ordinary taxpayers fund large tax cuts to rich taxpayers which are rewarded by campaign contributions to 'friendly' politicians...

Still another is the Corporate Subsidy Cycle, along with the Oligopoly Creation Cycle:

The government also rewards these campaign contributions by giving large subsidies to major corporations to enable them to globalize and crush smaller competitors, which drives up the share values of these large oligoplies, which in turn produces huge profits for the oligopolies and their rich taxpayers...

The problems with these various cycles, Pollard observes, is that the taxpayer outflows are increasing, while the inflows of tax money are decreasing. And the burden of government and consumer debt is skyrocketing. The overall process is what I've described elsewhere as a crisis of inputs in the state capitalist system.

What happens when the credit crunch comes -- taxpayers have borrowed their limit and just can't spend any more? What happens when the heavy trade deficit causes a spike in interest rates , making debts unrepayable (other than record rates of bankruptcy)? What happens when the real estate bubble bursts?

The answer: all these flows dry up. In other words, depression. It's interesting, by the way, how Pollard's cycles, the neo-Marxist analysis of Paul Mattick and James O'Connor, and Austrian theories of malinvestment and crackup booms, all dovetail so nicely together.

Followup on Sweatshops

In some countries, such as Burma/Myanmar, workers are forced by the state to work in miserable manufacturing jobs for powerful multinational corporations....

In the comments, Sheldon Richman, who is generally quite sympathetic to arguments like Hellmer's, wrote:

I planned to write an article based on Hellmer's JLS paper. But when checking her sources (The Economist and Amnesty International) I find no substantiation of her claim that "the military regime of Burma abducts its own citizens and forces them to work in factories owned by multinational corporations." I find many references to people being forced to work on road and military construction and on military farms (which is a horrible but different story) and oppression of political opposition, but not forced labor for multinationals in factories. Hellmer's references do not mention this. If it actually happens, I'd expect Amnesty to cover it and I'd expect to find material via Google. I find none.

On further investigation, he announced:

The founder of the Free Burma Coalition tells me there has been no allegation and no known instances of forced labor in a multinational corporation factory.

I'll be especially interested to see what Hellmer's response is, if any, since her overall argument is a good one and it's unfortunate to see it overshadowed by such a question of factual accuracy. I'll keep you posted.

In the comments we finally hear from Ms. Hellmer, who blames the factual errors in the two-year-old article on her still developing (undergraduate) research skills at the time, and on sloppy citation and use of sources. Very gracious and non-adversarial. As I commented on that thread,

I'm glad to hear your feedback on this. I've been bitten in the, um, hindquarters by poor fact-checking myself, so I can sympathize. It's a shame that this cast a shadow on the central point of your article, which I think is a sound one: the vulgar libertarian "best available alternative" argument is flawed, given the role of governments in collusion with sweatshop employers, in limiting the range of "available alternatives."

Wednesday, April 26, 2006

More On (Moron?) Fish! Philosophy

I finally bit the bullet and ordered a $3 used copy of the Fish! Philosophy bookfrom Amazon. I'm about as infuriated as I expected to be.

The reason for burnout in most workplaces is that management has deliberately and systematically downsized staffing levels, trying to get more and more work out of fewer and fewer people. The management of the average corporation manufactures burned out employees like Carter manufactures liver pills. Through Fish! Philosophy, management attempts to deal with burnout entirely through cheerleading and slogans--Stakhanovism--without having to increase staffing levels or pay, or otherwise alter its own contribution to the problem. Fish! Philosophy, at its core, is an attempt to get something for nothing.

The management sense of entitlement comes through loud and clear in Fish! Philosophy. Management is entitled to a workforce that's enthusiastic and dedicated and constantly goes the extra mile, regardless of how it gets screwed. Management is entitled to a workforce that greets every new steaming pile with a joyous cry of "Oh, boy! Shit again!" Management is entitled to something for nothing.

Burnout is the natural reaction to prolonged stress: a survival mechanism that involves shutting down, withdrawing, and breaking connections to the sources of stressful stimuli. It's what happens when people are doing their own work plus that of the downsized, often with no time for meal breaks, with less and less control over the structure and pacing of their jobs. Fish! Philosophy reminds me a lot of the military's attempts at creating pharmacologically engineered super-soldiers, robocops who can go 72 hours without sleep and never feel guilt or develop PTSD. In both cases, it's an artificial attempt to squeeze more out of people who've been pushed to the breaking point, rather than doing anything about the stresses they're subjected to.

Here's the thing: management doesn't care about what they've done to people, or whether it's right or wrong. And they don't care about internal or external customers, or their mission statements (and vision and values statements, either). What they care about is management featherbedding--more and more quality and process improvement committees--and the value of their stock options. All their smarmy Hallmark Cards rhetoric notwithstanding, both the production worker and the customer are means to an end for them. They're riding the gravy train, and they want to keep right on riding it. To keep the things that matter to them, they have to keep us running on the treadmill. And when they notice we're not putting out like we used to, they need to figure out what buttons to push to get their human resources back to producing value-added. Fish! Philosophy is a way of pushing those buttons.

Fish! Philosophy also seems to reflect a growing sense of management hostility to what Elizabeth Anderson called "separation of work from home" in her post coining the term "contract feudalism." Ken Blanchard, in the Preface, laments what he calls the TGIF mentality, the tendency to view work as a means to an end. How 'bout that? For the majority of self-employed farmers, tradesmen, and small businesspeople in this country a little over a century ago, the transition to an economy centered on wage labor was a huge culture shock. One of the main functions of the publik skool system was to reeducate a society of independent cusses on the habits of obedience and docility necessary for working in a factory under a boss. The skills of bureaucratic toadyism taught in the publik skools today, of sucking up to authority for a gold star or another item on the resume, are just the same function updated for a white collar world. It takes a lot of effort to get people's minds right and stamp out those last vestiges of ownlife. And surprise, surprise, surprise: there's an entire Motivational Mafia out there focused on getting people to love Big Brother and think of their jobs as the center of their life. I don't think it's gonna happen, though. People will always wake up, like Winston Smith, with that instinctive groan at the prospect of dragging themselves into that shithole again.

And speaking of Ken Blanchard.... He also wrote the Preface to Who Moved My Cheese?. And one of the Fish! Philosophy coauthors ofis a vice president in the Blanchard organization. So apparently there's an interlocking directorate in the Motivational Mafia.

Monolithic organizations are always looking to change reality: the market, customer attitudes, employee motivation. They believe that through analysis you can obtain a complete understanding of the dynamics of a system, enough to be able to prescribe solutions that will change behaviour. Anyone who has worked in any organization for a long period comes to learn that it is people who make the organization and its culture, not policies, systems, practices and 'leaders'. Natural organizations allow an (always incomplete and ever-changing) understanding of the dynamics of the system to emerge over time. They know things are the way they are for a reason, and they pay attention to it and then mutually agree to change themselves to adapt to the system.

The adversarial relationship of monolithic organizations with customers and everyone else also manifests itself in communication style. Advertising, bullying, shaming, one-upmanship and other propaganda techniques are used to bend the will of customers (and regulators). This inevitably backfires when these techniques are recognized for what they are (and it succeeds temporarily only because of the cleverness of the communications in disguising this propaganda as something else (I've often wondered how advertising and PR reps are able to sleep at night). Without the budget or the stomach for such techniques, natural enterprises must rely on more creative and less manipulative ways to get their messages across. They have learned, for example, that messages from happy customers and happy employees have enormous propagational power and endurance. But since they're satisfying an identified need rather than trying to artificially create one, their communication job is much easier to begin with.

Monolithic organizations have to acquire size and scale to operate economically. And they need to standardize products and processes because they cannot tolerate the inefficiency of diversity. They are constantly striving for elusive 'best practices'. By contrast, natural organizations operate economically by continuous innovation. They appreciate that the market for most of what they produce is finite, so rather than trying to squeeze more profit out of a product that is nearing the end of its life cycle by slashing costs, they instead identify new untapped needs of customers and innovate to satisfy those needs.

If you're a large, monolithic organization, you have huge fixed costs to cover, and may well feel that you don't have the luxury of waiting for new customer needs to be identified. Such organizations tend to try to 'create' needs by appealing to the vanity or status-seeking of customers. Such needs are generally incremental to already proven products -- new styles, colours, additional features added, but no real new needs met. By contrast, natural organizations start by doing their homework to identify, on a continuous basis, real untapped needs as they evolve and emerge, that they have the competencies and passion to satisfy. In many cases the customers don't know exactly what they need -- it takes imagination, creativity, foresight and collaboration to come up with bold new ideas that can satisfy a need that, while very real, may not yet be well articulated. That's real innovation.

The size and rigid structure of monolithic organizations makes them hugely risk-averse. Because they are inflexible, they try to anticipate risks and operational problems before they happen. This is largely futile despite the massive amounts many such organizations spend trying to do this, because this pre-emptive effort is necessarily focus on identified types of risk. As we keep learning, from Enron, asymmetric 'warfare' of all kinds, and unforseen natural disasters and diseases, many risks simply cannot be anticipated or prevented. Natural enterprises have learned to take a more improvisational approach to risks and operational problems, learning how and with whom to collaborate and ideate to respond quickly and effectively when such problems arise.

Jeremy Weiland on Green Markets

Monday, April 24, 2006

Corporate Personhood

In "The NRA Gets It Wrong," Sheldon Richman cited with favor Robert Hessen's argument, in In Defense of the Corporation, that all the legal privileges associated with the corporation can be achieved by free contract without any special grants or concessions from the state.

It is certainly true that a corporation per se is not a real person. No group is. But that does not stop us from conveniently referring to a group’s rights. This is acceptable as long as we remember that a group has only the rights that the individuals composing it have.

The big question is: are the corporation’s distinctive features derivable from the common law and contract, or do they depend on a grant of government privilege?...

The upshot is that, first, corporations are not creations of the state but networks of contracts among individuals, and, second, as a consequence they have the same rights as those individuals...

Not long afterward, in a post to the LeftLibertarian yahoogroup, he explained that he'd reconsidered his stance under the influence of a two-part article by Piet-Hein Van Eeghen in Journal of Libertarian Studies: "The Corporation at Issue" (that post, incidentally, resulted in several weeks worth of debate on the nature of corporate legal status).

A couple of stipulations here. First, I have not read the Hessen book. Second, I repeat my frequent disclaimer that as a layman, I am hopelessly lost in the maze of corporation law, and am in over my depth in counterfactual speculation as to the general effects of removing this or that feature of it. In following the fascinating debates on LeftLibertarian, I have generally agreed with the last opinion stated.

While it is common to list various typical corporate features, such as entity status, limited liability and perpetuity, there is really only one defining feature: entity status. Entity status means that certain legal rights and duties are held by the corporation as a separate, impersonal legal entity. In the case of the private business corporation, entity status implies that title to the firm’s assets is held by the corporation in its own right, separate from its shareholders. Illustrative of the fact that the corporate form of private enterprise deviates from traditional forms of private property, entity status renders the legal position of both corporate shareholders and managers (directors) awkward and ambiguous. As for corporate shareholders, they are commonly regarded as the owners of the corporation, but they are owners only in a limited sense. Shareholders do not have title to the assets of the corporate firm, but merely possess the right to appoint management and to receive dividends as and when these are declared; title to the firm’s assets reverts back to shareholders only when its corporate status is terminated. The lack of ownership rights over assets is illustrated by the fact that, in contrast to partners in an unincorporated partnership, corporate shareholders cannot lay claim to their share of the assets of the corporate firm nor do they have the right to force their co-partners to buy them out. Corporate shareholders can liquidate their investment only by selling their shares to third parties. In short, the ambiguity in the legal position of shareholders lies in the fact that, while certain traditional ownership rights rest with them (profit accrual and power to appoint agents to manage the firm for them), other traditional ownership rights are exercised by the corporation as a legal entity separate from them (title to the firm’s assets).

As for corporate management, their legal position is equally ambiguous. Managers are appointed by directors who are the representatives of shareholders. Ultimately, management is thus the agent for shareholders, managing the corporation as their representative. This, however, is only part of the picture. While management is the agent for shareholders in the sense of being ultimately appointed by and accountable to them, it is also the agent for the corporation itself. After all, in order to manage the corporation’s assets, management must legally represent the corporation as the titleholder to these assets. And because the corporation is an impersonal legal entity, agency for the corporation lends a significant degree of autonomy to the position of management, which is precisely why it has proved so difficult to make shareholder control over management more effective, despite the many legislative measures aimed at enhancing management accountability to shareholders. The significant degree of autonomy inherent in the legal position of corporate management was, of course, the main theme of Berle and Means’s (1932) seminal work on the corporation. To sum up, the position of management is ambiguous because management acts as agent for two principals, the shareholders and the corporation.

Other typical features of the corporation like limited liability and perpetuity are not independent, original attributes, but are derived from its entity status.

Shareholders possess limited liability because they do not own the corporation’s assets and are, consequently, also not liable for claims against these assets. Responsibility for corporate debt rests with the corporation in its own right rather than with them....

The corporate feature of perpetuity can also be traced back to the corporation’s entity status. It is because assets are owned by the corporation in its own right rather than by shareholders that the death or departure of shareholders does not affect its continued existence. While unincorporated partnerships need to be legally reconstituted each time partners leave, die, or are added, corporations continue irrespective of who holds their shares. The corporation’s entity status thus gives it a life independent of the life of its shareholders, which is the sense in which it is commonly said to possess perpetuity or immortality.

Above all, Van Eeghen objects to the corporate form as illiberal because entity status gives the corporation statelike features:

Originally only state institutions (central, regional, and local government) possessed corporate status, which seems entirely natural and appropriate. If we wish to escape Louis XIV’s infamous dictum “l’état c’est moi” (“I am the state”), which is the starkest, most chilling expression of state absolutism from which even ardent monarchists at the time recoiled, the state should indeed be given a legal entity separate from its officials. Only if such a separation exists can state power be vested in the office rather than the person; and only when state power is vested in the office can it be circumscribed by law. All this is the ABC of liberty and the rule of law. But if it is essential to the preservation of liberty and the rule of law that the state has a natural right to corporate status (entity status), it should equally be essential to the preservation of liberty and the rule of law that private individuals, when pursuing their own interests, are denied such a right and act in their personal capacity, which obviously does not exclude the possibility of private individuals acting as agents for each other....

Free incorporation for private business is objectionable from a liberal point of view because it grants a distinctive feature of the public sector, namely entity status, to private concerns without the accompanying restraints of democratic and legal control. As such, the private corporation constitutes an illegitimate mixing of the legitimate domains of the private and public sectors. If it is agreed that entity status is indeed a typical attribute of the state, then anarchocapitalists who advocate a stateless society have even more reason to oppose private firms taking on state-like attributes such as happens when they acquire corporate status.

Another objection is that the corporate form

contravenes the basic liberal (and common law) principle of personal responsibility..... Andrew Fraser... remarks in this vein: “Corporate law has been designed to facilitate a legalized flight from responsibility by those who nominally own the corporate system.”

Corporate shareholdership is a licentious and irresponsible form of ownership because it is granted privileges of ownership (accrual of profits and the appointment of agent-managers) without carrying the obligations of ownership (payment for losses). If shareholders receive the full benefit of enterprise when things go well, why should they not also carry the full cost of enterprise when things turn awry?8 Similarly, corporate management is licentious because it enjoys the privileges of ownership (control over assets by virtue of being the agent for the corporation) without having to face the burdens of ownership (payment for acquisition or loss bearing) and without being accountable to natural persons who do carry the full extent of these burdens, as shareholders don’t do either. As already mentioned, insofar as management is accountable to shareholders, such accountability is difficult to make effective especially when shareholdership has become highly diluted.

It's also worth noting that the immortality that goes with corporate entity status was, in the past associated with illiberal concentrations of power. For example, the Church (whose precise legal status as a quasi-public agency varied from country to country) was able to accumulate property from one generation to the next without ever lacking an heir, which meant that the process of accumulation was never reversed. The mass of property accumulated in its "dead hand" ratcheted steadily upward over the generations, and became the source of ever-greater political influence. The statutes of mortmain ("dead hand") were specifically designed to counteract this process. In modern society, the immortal corporation becomes a comparable concentration of wealth and political influence.

the inherence theory. According to this theory, the corporation has come into being as the product of contracting between private individuals for which no state involvement (active or passive) is needed beyond the enforcing of contracts in general. In consequence, the corporation is simply the product of the freedom of association, and any criticism of the corporate form is regarded as an attack on that freedom....

First, Van Eeghen challenges Hessen's argument that concession theory assumes a background of monarchical absolutism, in which assorted rights of property and contract are denied without a specific grant of privilege.

It is indeed an instance of monarchic absolutism when the king seizes all the land, prohibits private citizens from trading internationally unless they have his express permission, or appropriates the right to grant incorporation to local government at his discretion. Private agents should already have the right to own land or trade internationally, for which they should, therefore, not be obliged to seek the king’s favor. And local government should already have the right to corporate status, which is therefore not the king’s business to grant or withhold. On the other hand, though, if we accept that private agents do not have a natural right to assign the ownership of their assets to impersonal, state-like entities, it is not at all evidence of arbitrary state absolutism when the state grants incorporation to private agents only as a privilege and only under certain conditions, provided the state is democratically elected and the relevant conditions for incorporation do not otherwise clash with liberal principles—to be discussed below. Hence to argue that the concession theory is rooted in state absolutism is to beg the question whether private parties have a natural right to free incorporation or not; state absolutism can be shown to exist only if private agents do have such a natural right, which is exactly the point at issue here.

In response to Hessen's denial of entity status--that is, his argument that the legal rights of the corporation are only a contractual amalgamation of the individual rights of the shareholders--Van Eeghen writes

As far as entity status is concerned, Hessen starts out by giving it a subtly altered meaning. Entity status no longer refers to the fact that the corporation is a legal entity separate from shareholders, but merely to the fact that shareholders act as a unified collective in a court of law... The implicit suggestion is that the corporation is the undifferentiated collective of shareholders rather than a legal entity separate from shareholders. It is alleged that this view of entity status, which seems to confuse the joint-stock principle with corporate status, neither implies any fundamental difference from unincorporated business forms, nor does it amount to the privileged treatment of corporate shareholders vis-à-vis the outside world since the advantage of suing as a unity is neutralized by the disadvantage of being sued as a unity....

Hessen’s assertions in this regard seem contrived. First, the fact that shareholders have no legal title to the assets of the corporation, even when they seek to exercise such rights collectively (provided the corporation is not thereby broken up), clearly suggests that the corporation is a legal entity separate from the collective of shareholders and that title to these assets rests with the former. Second, if entity status refers to the collective of shareholders and it is the product of private contracting, there should be private contracts between individual shareholders in existence which stipulate their collective ownership in respect of the firm’s assets. But these contracts are simply not there....

Elsewhere Hessen criticizes the idea that the corporation is a legal entity separate from shareholders on the grounds that it introduces metaphors or fictitious entities into the discussion... But a legal entity is most certainly not fictitious or metaphorical by virtue of not referring to a natural person or a group of natural persons. The state (e.g., the Republic of South Africa, the United States of America) is also not fictitious even though it most certainly constitutes a legal entity separate from its citizens as natural persons.

If it is agreed that the corporation is a legal entity separate from shareholders, then Hessen’s claim that it can be the product of private contracting is obviously severely weakened if not dismissed. It is clear that private contracting can achieve only joint ownership of the contractors’ assets (a partnership); it cannot establish a legal entity separate from the natural persons of the contractors themselves to which they assign their assets. Not surprisingly, Hessen does not offer any meaningful explanation of how this can happen, beyond the naïve suggestion that private people can create a corporation simply by writing their own incorporation contract and lodging it with the relevant state authorities.... It is not remarkable that state involvement seems absent here, because the legislation that authorizes free incorporation is already on the statute books. The point is that free private incorporation does require special legislation, as history in fact has shown, because to allow private people to freely create impersonal legal entities for the furtherance of their own personal interests is in clear violation of common law tradition, not to mention basic liberal principles.

Van Eeghen also responds to Hessen's argument that the corporation and the partnership differ in degree rather than in kind, and his comparison of the corporate shareholder to a non-managing partner:

But there does seem to be a fundamental difference between partnerships and corporations. Whereas in the case of modified partnerships the rights and responsibilities of ownership are rearranged between nonmanaging and managing partners, these rights and responsibilities are partially cancelled for all corporate shareholders. There are no longer any managing shareholders in a corporation; instead all corporate shareholders are silent partners. From a liberal point of view, such modified partnerships are perfectly in order (e.g., the limited partnership or the Italian commenda), provided that some partners carry the full rights and responsibilities of ownership and that accountability towards third parties is thus not compromised.

Saturday, April 22, 2006

A Free Market Attack on Sweatshops

...many observers—especially libertarians— tend to view [anti-sweatshop boycotts] as actions arising from an ignorance of basic economics.... However, it is not necessarily correct to entirely dismiss the sense of injustice felt by these groups. Although these organizations may be misguided in only attacking the wages paid by corporations, the claims of injustice are not always fictitious, not by a long shot. In some countries, such as Burma/Myanmar, workers are forced by the state to work in miserable manufacturing jobs for powerful multinational corporations.... In other countries, such as Indonesia and several of those in Central America, governments have followed models of economic development that forced people from their land in order to attract multinational firms to export goods to the global economy and give the politicians a cut of the profit.... These models of sweatshop development do not follow the free-market ideal of resource allocation.... There is a link between such utilitarian models of economic development and slavery, as the former is a government’s way of violently forcing people to follow a model of economic action that these people would not agree to otherwise—presumably because they do not see the model fitting their best interests. Indeed, in these cases protesting voices should be heard, as governments are clearly violating the personal and property rights of individuals.

As many of the goods produced under these conditions are exported to the global economy, libertarians and other humanitarians should educate themselves about the conditions under which they are produced in a way that extends beyond the basic use of free-market teleology to explain why some people work in miserable conditions. Indeed, acknowledging that governments are often responsible for the plights of “sweatshop laborers” is an important step in fighting for the economic and civil liberties of people throughout the world. This step goes beyond the band-aid propositions of “corporate social responsibility” put forward by many anti-sweatshop organizations by addressing the real cause of miserable working conditions in many parts of the world. Anti-sweatshop organizations would therefore be better advised to focus on the government actions that have led to the miserable labor conditions that they are so fond of describing, thereby protesting these as the real cause of much of the misery evident in the developing world. Indeed, a fight for private property and personal protection against coercive aggression would be a more sustainable, logical, and economically literate approach to improving the conditions of the working poor of the world.

....Often, the harsh facts of global political economy do not follow the rules of free-market theory as the prerequisite of voluntary choice is often absent; people are sometimes kidnapped and forced to labor by their governments, and property rights are not always respected. While the above activities do not prevent individuals from pursuing what they believe to be their own best-interest, it is not reasonable to defend their choices and ignore the previous injustices that have led to their current state if one is to make a humanitarian argument against interference in the market. In a world in which personal and property rights are always respected, the logic of the economic libertarian is impeccable; however, advocates of this philosophy should continuously remind ourselves that this is not always the context in which real suffering people (especially in underdeveloped nations) operate when we demand that corporations be allowed to benefit from the differing legal systems abroad....

There is a strong connection between land expropriation and forced labor. Even without the legislation that has been passed in many parts of the world that explicitly leads to slavery, land expropriation forces the original landholders to pursue economic courses of action they would not have pursued if left to their own devices. Indeed, as writer George Beckford (1972) pointed out in his classic work Persistent Poverty, few people he has encountered choose to work for others when they own their own land, a condition that makes the land expropriation necessary in the first place. This pattern is most clearly seen in the history of Central America.

Thursday, April 20, 2006

Castro Agonistes

...Latin Americans are well aware that Castro-the-dictator is as much a US production as a self-creation. US policy has always been what they can’t overthrow from outside, they destroy from inside by driving a progressive government in as authoritarian direction as possible.

I've long taken a favorable view of Hannah Arendt's observation, in On Revolution, that virtually every revolution has significant decentralizing elements: attempts at worker self-management, local organs of direct democracy, etc. A classic example is the soviets and the workers committees in Russia, before Lenin either liquidated or coopted them. And outside pressure on a revolutionary regime and foreign support for counter-revolutionary forces (e.g., the Western states' support for the White armies in Russia) tends to strengthen the forces of consolidation and centralization, and to accelerate the suppression of decentralist tendencies.

I recall Chomsky arguing somewhere that the NLF, despite definite authoritarian aspects, at least was also engaged in grass-roots activities of genuine benefit at the village level like building irrigation systems, organizing peasant cooperatives, and the like. It had more genuine attachments to the peasants of the South than did the ruling party in Hanoi, at any rate. The main effect of the U.S. war effort in the South was to atomize civil society in the countryside, along with successfully decimating the NLF. The result was a hollowed-out shell, the almost total supplanting of the guerrillas by the NVA, and the filling of the void by the North Vietnamese state when Saigon collapsed.

In the specific case of Cuba, I'm not sure how much of Castro-the-dictator was just in there waiting for an opportunity to come out, but the pressures of the Cold War--the U.S. economic embargo, combined with increasing alignment with the USSR--certainly helped to bring his authoritarianism out. Via Fruits of Our Labour, I found an interesting account of the early post-revolutionary period in Cuba, a chapter in Cuba, Castro and Socialism, by Peter Binns and Mike Gonzalez. It appears that cooperative and "petty bourgeois" elements were heavily represented, if not predominant, in Castro's early economic policies.

The Cuban Communist Party, before the revolution, had had a checkered history of on-again, off-again collaboration with Batista. The Communist Party certainly had little use for the 26 July movement before it came to power. Castro, on the other hand, came from a background of nationalist opposition centered on what Binn and Gonzales call "petit bourgeois" elements and a "fundamentally non-working class tradition": the "urban middle class" and "middle farmers, small peasants and university students," supplemented by "the semi-incorporation of the organised working class."

Indeed, if I recall correctly, Castro actually liquidated the CCP for unacceptable competition with his own revolutionary movement after coming to power. When he declared himself a "Marxist-Leninist" in the early 1960s, he incorporated the remnants of the old CCP into his own revolutionary party.

Binns and Gonzalez, with typical Marxist blinders, see Castro's increasingly statist economic policy as a response to "objective conditions." The land reforms and other curtailments of exploitation left the laboring classes with more disposable income and greater demand for consumer goods, which (non sequitur alert) could only be met by nationalizing the economy:

So why then did Castro move towards the creation of a monolithic statised economy? The major reason must be found in his long standing commitment to diversify the economy, to end its dependency on the US and the vagaries of the world sugar market, and to all-round economic development. The question that came to be posed in the summer of 1959 was this: how were the reforms of the first part of the year to be paid for? The rapid increase in wages, the fall in unemployment, the drastic reduction in rents (up to 50%), the cheapening of electricity, telephone and medicine charges; all put much more money into the workers’ pockets. This automatically increased the demand for consumption goods – all of which had to be imported – and food. The latter automatically put pressure on the land available for sugar; and since this provided Cuba with more than 80% of the exports from which the imports had to be paid, this situation could not be allowed to persist indefinitely. Only industrialisation and diversification could solve the problem. The fantastic variability in the price of sugar, and Cuba’s almost total dependency on it as a source of foreign earnings, meant that the level of demand in the domestic economy was much too unpredictable for most capitalists to want to take the risk of relying on it as a source of income. And, without that, no advantage attached to investing productive capital in Cuba. With a very small and highly unpredictable home market, and with just about the highest wage levels in Latin America, there was not the least chance of the situation changing if the bourgeoisie was simply left to its own devices.

The matter was made more acute by land reform. Again this was a long standing commitment of Castro’s from the mid-1950s: antipathy to the latifundistas, the huge landowners, was the cornerstone of Castro’s radical liberal programme. The May 1959 Land Reform Act has to be seen in this light. It was in no way a socialist measure, nor one which led to collectivisation in any other form. It abolished only the very largest estates (those of more than 402 hectares; though even here there were exceptions which allowed much bigger farms – up to 1,342 hectares – that were efficient to continue), and it did not solve the problem of the indebtedness of the small peasant. Indeed one prominent agronomist sharply contrasted the 1959 reform with those in East Europe in the early 1950s; and suggested strong parallels with those in Italy in 1949-50 instead. Yet for all that, something like 25% of the cultivable land was covered by the Act, and was distributed to the poorer peasants. The effect was to increase the proportion of land that was devoted to immediate consumption rather than providing the country with an exportable surplus, and this added considerably to Cuba’s problems. Although it was also true that much of the land previously owned by the latifundistas was poorly tended, the fact remained that to increase productivity significantly would have required levels of investment and skilled personnel that were just not available at the time.

The initial reforms were thus in no way reminiscent of the state-capitalist “collectivisations” of Eastern Europe in the 1950s, nor Cuba’s own 1963 reform; but what they did do was to create a situation that only a state-capitalist programme could solve.

I'm not sure why this is. If the standard of living had increased so much (rents cut in half, the highest wages in Latin America), why was it so self-evidently beyond the producing classes to pool their own surplus for investment? Why could peasants not have cooperatively invested in labor-saving technology to increase their own productivity, and free up labor for other forms of production? In any case, if the increased prosperity of Cuban society created more purchasing power, and the increased demand for consumer goods could be met by importation, why was that a "problem" to be addressed through the state? Domestic industry would expand at the point when native producers could supply consumer goods more cheaply than the foreign manufacturers. And if anything, the removal of hindrances on cooperative marketing would have made the sugar industry less dependent on the vagaries of world commodity markets. In the meantime, the domestic agricultural sector would have been increasingly diversified with staple crops for domestic consumption, and the peasantry would have been capable at least of feeding itself on its own land, with a little surplus for buying a few luxuries from abroad: a marked improvement over the Batista dictatorship, I'd say.

I'm guessing a lot of this stems from the affinity for blockbuster industrialization projects and a religious faith in economies of scale (faith, because they're "things not seen" beyond relatively low levels of output). It also probably owes something to an implicit assumption that large-scale industrialization can only be carried out by some far-seeing "progressive" class against the will of the producing classes: either "primitive accumulation" on the model of the Western enclosures and expropriations, or "socialist accumulation" on the Stalinist model. Either way, the producing classes will just sit around comfortably chewing their cud unless they're driven like beasts into the factories.

The hyper-mechanization of agriculture that was brought about under influence of Russian aid was actually less efficient, as shown by the increased standard of living produced by intensive farming on the neighborhood scale since the post-Soviet collapse of Cuban mechanized farming. During the years of Soviet support, Cuba was locked into a neocolonial policy of growing sugar for the Soviet bloc on giant agribusiness plantations (sorry, collective farms) in return for consumer goods. Hmmm--sound familiar? Since the end of fraternal assistance between progressive peoples, and all that,

....Cuba... learned to stop exporting sugar and instead started growing its own food again, growing it on small private farms and thousands of pocket-sized urban market gardens—and, lacking chemicals and fertilizers, much of that food became de facto organic. Somehow, the combination worked. Cubans have as much food as they did before the Soviet Union collapsed. They’re still short of meat, and the milk supply remains a real problem, but their caloric intake has returned to normal....

In so doing they have created what may be the world’s largest working model of a semi-sustainable agriculture, one that doesn’t rely nearly as heavily as the rest of the world does on oil, on chemicals, on shipping vast quantities of food back and forth.

Anyway, justified or not, Castro probably did see the cutoff of U.S. aid following the land reform as forcing him into an increasingly statist path of industrialization.

It was the 1959 land reform – limited though it was – which first brought a reaction from the USA. Before that America and its multinationals coexisted peaceably enough with the new regime. But after it things were quite different. A substantial amount of US-owned land was involved and Washington demanded full and immediate compensation for lands seized in the 1959 Act; it refused financial support to the Cuban regime, supported the most reactionary of the Batista followers who had now become refugees in Miami, and even began to aid their piratical attacks on Cuba itself.

From the Autumn of 1959 through 1960 events moved very rapidly. Faced with the refusal of the USA to grant aid, and an economy that could not survive in its old laissez-faire form without such aid, Castro was forced to use the state in a much more activist way in the economy. In September 1959 he announced that henceforth economic development would have to take place under the auspices of the state. On the land the property gained by Batista’s followers during his regime was confiscated at the end of the year. About 400 cooperatives and 485 Peoples Stores (designed to eliminate rural profiteers) were set up by the newly established INRA (National Association of Agrarian Reform). But Castro at this point still hung back from nationalisation measures.

The latter were adopted in response to more active economic warfare by the U.S.

The next phase in Cuba’s attempt to break from the stranglehold of dependence was connected with oil. The USSR agreed to supply a limited amount of crude to Cuba in the summer of 1960 in exchange for sugar. But the multinationals – Texaco, Shell and Esso – refused to refine it in their Cuban refineries. The Cuban government reacted swiftly, seizing the installations at the end of June 1960. Within a week, Eisenhower had cancelled Cuba’s remaining quota of sugar imports to the USA. This was followed immediately by the confiscation of about $800m of US corporation property – in oil, sugar, electricity and mines. The USA responded with a total trade embargo to and from Cuba – a devastating economic blow given Cuba’s total dependence on the US connection. Finally the Cuban regime completed its hold on industry in October 1960 with the nationalisation of the banks, hotels, cinemas and most of the factories and shops.

In the face of sabre rattling by Kennedy and a genuine threat of invasion, Cuba became increasingly totalitarian. One manifestation of this was the so-called "Committees for the Defence of the Revolution" (CDRs), which were "[o]rganised on a block-by-block basis, [for the purpose of forming] small squads of vigilantes to observe and report on possible fifth columnists amongst the erstwhile lackeys of Batista and the US multinationals."

Meanwhile, as Castro increasingly resorted to autarky under the U.S. embargo, a major part of those engaged in commerce and the skilled professions left the country. Binns and Gonzalez describe the middle class exodus in a disparaging tone that I consider completely uncalled for:

the social basis of support for the old order within Cuba itself was being rapidly eliminated by the fundamental changes that the nationalisation and land reform measures were producing. More than 1/2 million refugees left Cuba in the first 3 years of the Castro regime, unable to make a living from The exploitation of others any more. First to go were the beneficiaries of US tourism: the US banned its citizens from travelling to Cuba, and this led to the 10,000 pimps, the 27,000 croupiers, and many other hangers-on leaving. Then followed the business men, the Batista ex-officers, the pampered state officials, the elite professions, the landowners and so on. However much the US might have wanted to put the clock back, by 1961 the layers of Cuban society that would have enabled them to “Cubanise” any return to the old order had more or less disappeared. The Castro regime had quite effectively removed opposition to its continued rule.

No kidding. But it seems to me he had to create the opposition before he could remove it. During the early days of his regime, virtually the entire opposition came from Batista's officers and the latifundia owners who'd been expropriated by a fully justified land reform. To demonize the entire commercial middle class, putting it into the same category as landlord and military oligarchs and corrupt state officials, is insane.

And rather than a gradual and peaceful path to industrialization, with the increasingly prosperous laboring classes cooperatively pooling their own surplus as capital, Castro and Che were left with the prospect of imposing industrialization as a top-down on a virtually gutted society. The very petty bourgeois classes who had been the backbone of Castro's revolution had fled the country.

But I get the distinct impression that American policy elites not only helped all this to happen, but that they actually preferred a totalitarian Cuba with a nationalized economy, over the path the country appeared to have been taking after the initial land reform. If Jones couldn't be brought back, Orwell's neighboring farmers preferred at least that the pigs run Animal Farm into the ground, rather than that the animals succeed in peacefully working it with their own labor. A "petty bourgeois" Cuba of peasant proprietors and small tradesmen and storekeepers, peacefully producing and trading without paying tribute to an oligarchy of landlords and generals, would have been even more distasteful to the proponents of "free enterprise" in the U.S. than to Marxists like Binns and Gonzalez.

There is a Cuban revolution to be reclaimed by anti-statists--much like the Russian revolution before the Congress of Soviets was purged and the anti-Bolshevik Left liquidated, when the soviets were still genuine organs of self-government and the workers' committees still functioned in the factories. Castro and the Miami reactionaries, likewise, are not our only choices.

Wednesday, April 19, 2006

Egg on My Face

I thought it was getting past time for my shipment of books to arrive from the printer, so I contacted them just now. I was mortified to learn that they had no record of the email I sent with the order information. I have been told that the order will be rushed, which means I should have them in about 2 weeks.

This is not the first time, or even the second, that I've had an order screwed up in some way through miscommunication at Blitzprint.

If you aren't willing to wait, please let me know and I'll try to make refund arrangements. If you are, I greatly appreciate your patience.

Tuesday, April 18, 2006

Agorist Literature

1) Thanks to Wally Conger, I've stumbled onto the motherlode! KoPubCo (publishing division of Triplanetary Corporation) has a huge treasure-trove of publications by the Movement of the Libertarian Left. All for sale, of course!

Even better, according to the cover, the April/June 1981 issue of New Libertarian includes Chapter 2 of SEK3's Counter-Economics. Since I can't see any chapters similarly featured on any of the other issue covers and they don't provide tables of contents, I've contacted KoPubCo for information on what issues Counter-Economics was serialized in.

Monday, April 17, 2006

A Strategic Green-Libertarian Alliance

[Update. Shawn Wilbur has used this post as a reading assignment in his Great Ideas honors class. See the post on it at his The Very Idea course blog for a detailed discussion of it. Nice to know my work is warping the minds of another generation--I just hope it doesn't put them off of individualist anarchism. I left a comment on his blog post that mentions some criticisms in the thread below.]

In the past, I concentrated mainly on building a consensus on substantive policy issues, rather than a common political strategy. But recently I read an interesting blog post by Logan Ferree, who suggested that libertarian Democrats should take a page from the 1994 Republican playbook and craft something like the "Contract With America," designed to build a large majority that cuts across party lines.

Our conclusion is that Democrats need to work on their economic agenda. If we're thinking about ten specific legislative proposals around seven to eight should focus on economic issues....

If you can craft a piece of legislation dealing with an issue like spending, taxes, corporate welfare, or even trade, that receives the support of BOTH liberals and libertarians you have found a clear "60% issue." And that, my friends, is victory for the Democratic Party.

I'd like to take it a step further and see a strategic alliance of DFC Democrats, Libertarians and Greens adopting a formal statement of shared principles along the lines of the "Contract With America." It would involve no compromise in the differing ultimate goals of these different groups, and would be a win-win proposition in the intermediate term. The basic principle of all the planks would be that all parties agree to first withdraw existing state policies that promote the polarization of wealth, the concentration of corporate power, pollution and excess consumption of resources, etc., before even considering further augmentation of the state:

1) eliminate all corporate welfare spending, and translate this and all other budget savings (e.g., a radical scaling back of the drug war) into income tax cuts on the lowest brackets; eliminate all differential corporate income tax benefits, including deductions and credits, and lower the corporate income tax rate enough to make it revenue neutral;

2) eliminate all credit union regulations more restrictive than those on ordinary commercial banks; eliminate capitalization requirements and other entry barriers for banks engaged solely in providing secured loans against property;

3) fund federal highways and airports entirely with tolls and other user-fees, with absolutely no subsidies from general revenues, and no use of eminent domain;

4) repeal Taft-Hartley, all legislation like the Railway Labor Relations Act which restrains specific categories of workers from striking, and all legal restrictions on minority unionism in workplaces without a certified union;

5) repeal all food libel laws, liberalize or eliminate restrictions on alternative medicine, and radically scale back or eliminate the so-called "intellectual property" of the agribusiness, infotainment, and drug industries; radically scale back or eliminate patents in general;

6) devolve control of federal land to states, counties and municipalities, with those governments replacing much or all taxation of income and sales with severance and resource extraction fees as a source of revenue;

7) restore the common law of liability to its full vigor, in preference to the regulatory state, as a way of forcing pollutors and other corporate malefactors to internalize the costs they impose on society; make civil damages directly proportional to the harm done;

8) at the state level, drastically scale back the drug war and translate the savings into eliminating the sales tax and cutting income taxes on the lower brackets; at the state and local levels, eliminate all corporate tax incentives, public spending on industrial parks, and the like, and reduce income taxes on the lower brackets accordingly; at the local level, shift all current taxes on buildings and improvements and personal property, and all sales taxes, onto the unimproved site value of land;

9) at the local level, accept some portion of taxes in LETS notes and other alternative currencies;

10) eliminate all local zoning restrictions on mixed-use development like neighborhood grocers in subdivisions, and walkup apartments downtown; fund all urban freeway systems with tolls; require real estate developers to pay the full cost of extending roads and utilities to new subdivisions, instead of passing on the cost to tax- and ratepayers in old neighborhoods.

In short, as Tom Knapp put it, cut taxes from the bottom up and welfare from the top down. (Note that this list consists entirely of economic and pocketbook issues; civil liberties issues like the drug war are brought in only to the extent that they affect government expenditures or revenue.)

The Green and Libertarian parties and the DFC would agree not to run a candidate in any state or local race against a candidate who had already signed onto the Contract.

The main sacrifices, from the points of view of the respective parties to the Contract, would be from

1) a certain kind of libertarian who identifies on a visceral level with big business as the victimized party in modern society, and identifies "free market" advocacy with a zeal for defending beleaguered, pitiful corporate interests against the looming tyranny of welfare mothers; and

2) a certain kind of state socialist with an emotional affinity for state intervention in the market, and an aesthetic aversion to free markets in principle.

Both groups might well exclude themselves from any such alliance. But I suspect a majority of Libertarians and Greens, with a few likeminded candidates from the Democratic and Republican parties, and majorities or sizable minorities of the grass roots constituencies of the two major parties, would find it appealing on a very common sense level. Such a program would be immensely appealing to the libertarian, populist and decentralist values of the two major party constitencies, who often have more in common with each other than with the corporate centrists who control their respective party establishments. Neither side has heard a sincere and genuine advocacy of those values; instead they've heard them used, by their respective party establishments as a smokescreen for promoting the interests either of big business or of state bureaucrats and elitist social engineers. The last thing in the world that either party establishment wants is for the GOP rank and file to find out that the real welfare parasites are in the corporate suites and that they're terrified of the free market, or for the Democratic rank and file to learn that the "compassionate" and "progressive" state they love so much is the main bulwark of corporate power.

What's more, the very fact of the Green and Libertarian parties officially signing onto a common policy document, perhaps along with other third parties, would in itself be a noteworthy event and focus public attention on a block of third parties as a growing alternative to establishment politics.

Thursday, April 13, 2006

Roderick Long: Rothbard Memorial Lecture

Well, there's finally a text version of Roderick Long's Rothbard Memorial Lecture ("Rothbard's 'Left and Right': Forty Years Later") online, so those of us with crappy dialup connections can enjoy it here in the Land That Time Forgot. His jumping off place is Herbert Spencer's strategic alliance with the Right, which he compares and contrasts with Rothbard's attempted libertarian-New Left coalition.

According to Rothbard ("Left and Right: The Prospects for Liberty"), "Spencer's tired shift 'rightward' in strategy soon became a shift rightward in theory as well." To illustrate this tendency, Long produces one of my favorite Benjamin Tucker quotes:

I begin to be a little suspicious of [Spencer]. It seems as if he had forgotten the teachings of his earlier writings, and had become a champion of the capitalistic class. It will be noticed that in these later articles, amid his multitudinous illustrations … of the evils of legislation, he in every instance cites some law passed, ostensibly at least, to protect labor, alleviate suffering, or promote the people's welfare. He demonstrates beyond dispute the lamentable failure in this direction. But never once does he call attention to the far more deadly and deep-seated evils growing out of the innumerable laws creating privilege and sustaining monopoly. You must not protect the weak against the strong, he seems to say, but freely supply all the weapons needed by the strong to oppress the weak. He is greatly shocked that the rich should be directly taxed to support the poor, but that the poor should be indirectly taxed and bled to make the rich richer does not outrage his delicate sensibilities in the least. Poverty is increased by the poor laws, says Mr. Spencer. Granted; but what about the rich laws that caused and still cause the poverty to which the poor laws add?

Rothbard's objection to this strategic orientation, according to Long, was

that the new left-right spectrum persistently misleads libertarian-minded thinkers into viewing governmental regulation as anti-big-business; and if our opponents are anti-business, what must we libertarians be but pro-big-business, defenders of what Ayn Rand in one of her pro-big-business moods (she did have other moods) called "America's Persecuted Minority"? The result is that governmental intervention on behalf of big business tends to become invisible, or at least unimportant, because our ideological blinders make it hard to take seriously. Who would want to restrict the free market on behalf of business interests? Not those left-wingers, because they're anti-business; and not us right-wingers, because we"re pro-free-market. It's hard to recognize the significance of pro-business legislation even when one officially sees and acknowledges it, if one has internalized a worldview that excludes such legislation from the list of major dangers.

To back this up, Long produces another quote from Rothbard:

Every element in the New Deal program: central planning, creation of a network of compulsory cartels for industry and agriculture, inflation and credit expansion, artificial raising of wage rates and promotion of unions within the overall monopoly structure, government regulation and ownership, all this had been anticipated and adumbrated during the previous two decades. And this program, with its privileging of various big business interests at the top of the collectivist heap, was in no sense reminiscent of socialism or leftism; there was nothing smacking of the egalitarian or the proletarian here. No, the kinship of this burgeoning collectivism was not at all with socialism-communism but with fascism, or socialism-of-the-right, a kinship which many big businessmen of the twenties expressed openly in their yearning for abandonment of a quasi-laissez-faire system for a collectivism which they could control…. Both left and right have been persistently misled by the notion that intervention by the government is ipso facto leftish and antibusiness.

This results, Long says, in "the tendency among some libertarians to become kneejerk apologists for the corporate class." And it results in the mirror-image tendency on the left to be taken in by the Art Schlesinger myth that "progressive" state intervention is motivated by a desire to restrain big business. For example, the individualist anarchist turned social democrat, Victor Yarros:

[W]hatever the origin of the State, it was absurd to assert that it was always and inevitably the instrument of privilege and monopoly, and must remain such under all conditions. The evidence glaringly contradicted that conception. The democratic governments have increasingly yielded to the pressure of farmers, wage workers, and middle-class reformers.

The hatred of our plutocrats and reactionaries for the New Deal is alone sufficient to dispose of the charge that the State is simply the tool of the economic oligarchy. In the past, the same interests bitterly fought Woodrow Wilson's reform program, and fought in vain.

Uh, yeah. I guess that explains the role of Gerard Swope in the New Deal. Not to mention the great populist Democratic tradition of maintaining an endowed Goldman-Sachs Secretaryship of the Treasury.

There's also a good discussion of a strategic question that provoked lots of interestingdebate here recently:

Another root of the Rothbard-as-utopian-perfectionist myth is the fact that Rothbardians do indeed reject many reforms that are advertised as incremental steps toward liberty; but in such cases the reforms are rejected not because they are incremental but because they do not really move in the direction of liberty.

One example is education vouchers, which as Rothbardians we find problematic not because they fall short of a free market in education but because they threaten to extend to the private schools the kind of micromanagement control that government currently exercises — thus arguably making things worse. Another is so-called "privatization," not in the term's original sense of a transfer of services from government provision to free-market provision, but in what has come to be the prevailing sense of a conferral of governmental privilege and patronage — subsidies, monopolies, and the like — on private contractors. To the Rothbardian, far from stripping government of some of its powers, such "privatization" simply transforms private firms into arms of the state.

Now whether a shift from a comparatively socialistic to a comparatively fascistic mode of statism is a move up or a move down is perhaps a matter of taste; but at any rate we do the libertarian cause no favor by encouraging potential converts to associate plutocratic political cronyism with the free market. (Similar criticisms apply to "deregulation" when the entities being deregulated are the beneficiaries of state privilege, as when the Reagan administration eased restrictions on Savings & Loans while keeping federal deposit insurance intact, thus giving them carte blanche to take risks with the taxpayers' money.)

But my favorite part of the lecture is Long's treatment of the semantic issues surrounding the terms "capitalism" and "socialism":

Libertarians sometimes debate whether the "real" or "authentic" meaning of a term like "capitalism" is (a) the free market, or (b) government favoritism toward business, or (c) the separation between labor and ownership, an arrangement neutral between the other two; Austrians tend to use the term in the first sense; individualist anarchists in the Tuckerite tradition tend to use it in the second or third. But in ordinary usage, I fear, it actually stands for an amalgamation of incompatible meanings.

Suppose I were to invent a new word, "zaxlebax," and define it as "a metallic sphere, like the Washington Monument." That's the definition — "a metallic sphere, like the Washington Monument. " In short, I build my ill-chosen example into the definition. Now some linguistic subgroup might start using the term "zaxlebax" as though it just meant "metallic sphere," or as though it just meant "something of the same kind as the Washington Monument." And that's fine. But my definition incorporates both, and thus conceals the false assumption that the Washington Monument is a metallic sphere; any attempt to use the term "zaxlebax," meaning what I mean by it, involves the user in this false assumption. That's what Rand means by a package-deal term.

Now I think the word "capitalism," if used with the meaning most people give it, is a package-deal term. By "capitalism" most people mean neither the free market simpliciter nor the prevailing neomercantilist system simpliciter. Rather, what most people mean by "capitalism" is this free-market system that currently prevails in the western world. In short, the term "capitalism" as generally used conceals an assumption that the prevailing system is a free market. And since the prevailing system is in fact one of government favoritism toward business, the ordinary use of the term carries with it the assumption that the free market is government favoritism toward business.

And similar considerations apply to the term "socialism." Most people don't mean by "socialism" anything so precise as state ownership of the means of production; instead they really mean something more like "the opposite of capitalism." Then if "capitalism" is a package-deal term, so is "socialism" — it conveys opposition to the free market, and opposition to neomercantilism, as though these were one and the same.

And that, I suggest, is the function of these terms: to blur the distinction between the free market and neomercantilism. Such confusion prevails because it works to the advantage of the statist establishment: those who want to defend the free market can more easily be seduced into defending neomercantilism, and those who want to combat neomercantilism can more easily be seduced into combating the free market. Either way, the state remains secure.

I strongly recommend reading this passage in conjunction with Sheldon Richman's recent post "Capitalism vs. Capitalism," and Chris Sciabarra's "Capitalism: The Known Reality." Along the same lines, Lady Aster drew my attention to this classic bit of late '40s propaganda, a short film on capitalism. The high school students discussing capitalism on their radio program mention "private property" and "freedom of contract" as its defining features, and one girl says that "capitalism is free enterprise" (or a metallic sphere, like the Washington monument). Naturally, all these lessons about capitalism are illustrated by Mr. Brown's grocery, where a couple of kids go to buy supplies for a weenie roast. Somehow, I doubt if this film and hundreds like it in that same time period were funded by people like Mr. Brown. For an account of the forces behind the post-WWII corporate propaganda offensive, which didn't bear much resemblance to Brown's grocery, check out Alex Carey's Taking the Risk Out of Democracy: Corporate Propaganda Versus Freedom and Liberty.

Wednesday, April 12, 2006

Once More Into the Breach

Sheldon Richman weighs in with a criticism of Walter Block's review of my book in the latest issue of JLS. Delicious! Just read it for yourself. Block, in response, demonstrates the same apparent difficulties with reading comprehension he had with my book. Finally, I jump in here and here with a response to Block's comments.

More on Chris Tame vs. the Corporate State

It was while reading American studies at Hull University that Tame became active in the Conservative students' organisation (then led by future journalist Andrew Neil). Since it was dominated by Heathites and authoritarians, he found this an ideologically arid environment. True to his propensity for controversy, he announced his departure from the rostrum at an annual Tory student conference in the early 1970s. He never went back. The Conservative party was in his opinion too dominated by a "corporate elite" wedded to lobbying for state handouts and restrictions on the rights of trade unions - in his words "corrupt state capitalism".

Friday, April 07, 2006

Managerialism and the State

Karen De Coster has an interesting article at Lew Rockwell, "Dilbertville for Dummies," speculating on the role of the state in promoting the bureaucratic corporate culture that is currently the dominant form of business organization. Her point of departure is a Stephen Carson post at Mises Blog on how federal tax policy has encouraged the proliferation of cubicles. Cubicles count as furniture, it seems, and thus depreciate in only seven years, compared to 39.5 years for permanent structures. That spurred Carson to write:

How many unpleasant aspects of corporate life are traceable back to government intervention?

Not much more than a week before his death, Dr. Chris Tame posted an email to the Libertarian Alliance Forum on "the world of 'managerialism'"

- straight out of the pages of "Dilbert" - nothing do with a real free market, but the result of limited liability and the separation of ownership and control.

Not long ago, I was reading David M. Gordon's book Fat and Mean: the Myth of Managerial Downsizing. He demonstrated that, contrary to popular impressions, the total portion of the labor force devoted to managerial functions actually increased through the '80s and '90s. What's more, the average American corporation has about three times as many supervisory employees, proportionally, as its counterparts in Europe and Japan. And a much higher proportion of total wages and salaries (about 40%) goes to supervisory workers than was the case thirty years ago. The main reason, Gordon argued, is the mushrooming need for internal surveillance and tracking systems to cope with an increasingly disgruntled work force, as the pay of non-supervisory production workers has remained flat for three decades. The amount of resources devoted to supervision correlates closely with the degree of income polarization in a country.

But Gordon also argued that management autonomy had something to do with it. In many cases, the interests of stockholders would be better served if management staff were drastically cut, resources were shifted into more production workers and higher wages, and production workers had more control over the process. But that would be a death blow to the managerial culture in the average large American corporation. I don't go so far as Gardiner and Means or J.K. Galbraith in asserting management independence from stockholder control. But management does have a great deal of autonomy, bounded as it is, in promoting its own interests within the corporation. And one aspect of this is management featherbedding, with corporate bureaucrats demonstrating prestige through the number of liveried retainers in their respective domains. What's more, part of it is genuine cluelessness: they can't think of any way to improve how workers are doing things except to increase the number of managers swarming around and poking into everything they do.

Tax policy alone, in my opinion, has had a huge effect in promoting centralization, hierarchy, and the culture of managerialism. Capital depreciation, for example, artificially shifts the competitive advantage toward those corporations engaged in the most capital-intensive forms of production. The R&D tax credit, likewise, has promoted higher tech forms of production. The tax deduction for interest on corporate debt, along with the capital gains tax exemption of securities transactions involved in mergers, has the effect of subsidizing concentration. Not, I stress, that such tax expenditures are government "handouts." But their effect is exactly the same as if the state started with a corporate tax rate of zero and then imposed a punitive tax only on those firms engaged in low-tech, labor-intensive production. The form of production associated with these changes involves the deskilling of blue collar work, and the upward shift of control over production decisions into the hierarchy of managers and engineers.

But regulatory policy also has a large effect. For example, I recently learned that the Arkansas state health department actually requires hospitals to have a "quality" committee or an internal system of "process improvement" in every department. I'm surprised they haven't yet legislatively mandated having a mission statement, vision statement, and statement of core values. (JCAHO inspectors, whose accreditation process is still nominally private and voluntary, do in fact place a high priority on asking employees what the mission statement says and similar inanity.)

As you might guess, any time it is left to middle managers to find new ways of improving "quality," their solution is likely to be everything but increasing the resources and autonomy of production workers; again, as you might expect, it will rather involve expanding the power of middle managers with even more committees, meetings, tracking forms, etc., so that production workers have even more interference and paperwork to deal with, and less time to get their real work done. And "productivity" will be increased, to make up for these increased middle management costs, by cutting staffing even more and driving everybody even harder. In turn, the resulting proliferation of medication errors, hospital-acquired infections, and so forth, will spur management to devote still more resources to committee meetings and tracking forms. Any "reform" carried out by management will serve mainly to increase the power of managers.

Several years ago, Scott Adams wrote an appendix to The Dilbert Principle on his "OA5" management philosophy. That philosophy entailed, mainly, ruthlessly weeding out those not directly involved in producing or improving the product. As I understand it, that means in practice that the average American corporation would 1) streamline its hierarchy until it had supervisory staff in the same proportions as its European or Japanese counterpart; 2) put the savings into increased production staff and increased pay; and 3) replace all the "quality" and "process improvement" committees with a great deal more direct worker control over how the production process is organized on the shop floor (perhaps along the lines of the Coventry system). The result would likely be skyrocketing productivity and morale.

I've written a lot about how the state has contributed to the present system of absentee ownership and the separation of labor from ownership of the means of production, and artificially inflates rentier incomes. I stand by it. Certainly in the past few decades, the income of the very top plutocracy has exploded upward. But on the whole, I suspect that the average worker suffers almost as much from managerialism and the resources eaten up by bureaucratic overhead than from the income of rentiers.

To some extent, I suppose, the owners are held hostage by their dependence on the managerial class. The monopoly profits of big business depend on cartelization by the state; and given this situation, even at bare minimum a considerable power is entailed for the managerial bureaucracy. Such empowerment of labor over the production process, despite its almost certain benefits to productivity in the short run, would greatly increase the bargaining power of labor in the long run, and likely imperil profits as much as management salaries.

Land Theory Debates

Recently Chris Toto, on the DFC Talk yahoogroup, reminded me of something I hadn't looked at in a long time: Debbie Clark's debates on Georgism with the Austrian/Rothbardian George H. Smith, reproduced from the (objectivist) Atlantis list. Debbie also includes some commentary after the fact by Dan Sullivan and Harry Pollard. Definitely worth checking out.

Thursday, April 06, 2006

Material on the History of Mutualism

If you haven't visited In the Libertarian Labyrinth lately, you should stop by and do some catching up. Shawn Wilbur's been plugging away with his historical research on William Greene and the broader mutualist movement. One bit of good news is that he's got his main site up again, with a different host--and it includes his Greene page, with a lot of the online writings back up.

In 1822, Fourier used the term mutualism in his Traité de l'association domestique-agricole, but only as one of dozens of neologisms he created to explain his complex form of associationism. In 1826-7, five columns appear in the New Harmony Gazette, under the byline "A Mutualist" (also identified as "a member of the community.") These advocate mutual-aid experiments within existing cities, rather than in separate experimental communities.... Around 1833, in France, the Company of "Mutuellistes" are active as a labor organization in Lyons. In What Is Mutualism?, Clarence Lee Swartz gives his own account of the origin of the term, claiming that "[t]he word "mutualism" seems to have been first used by John Gray, an English writer, in 1832." This may be true, although I have yet to confirm it. Certainly, Gray uses terms from the same family, and proposes reforms that resemble those associated with mutualism. The Oxford English Dictionary gives credit for the first use of mutualism to Charles A. Dana, in his 1849 Proudhon and his Bank of the People. Dana talks about "the principle of reciprocity or mutualism, if we may use a new word." The OED dates mutualist to 1848 and an English translation of a French work, where the subject is the weavers company of Lyons.

What fascinates me about all this is that the time period we're talking about, from the 1820s to the 1840s, was simultaneously the period of origin of classical liberalism, socialism, and anarchism. The term "socialism," for example, was first used in the London Co-operative Magazine in 1827. And the boundaries between these movements were quite indistinct for some time. For example Thomas Hodgskin, who is usually classed among the Ricardian socialists, was simultaneously both a market socialist and a leading figure of classical liberalism; he was a formative influence on both Karl Marx and Herbert Spencer, if you can get your mind around that. The roots of free market liberalism and classical socialism are very much intertwined in their early days.

As hard as it may be to believe these days, the classical liberalism of the 1820s and '30s was a revolutionary doctrine at war with the remains of the landed oligarchy and privileged merchant capital. It was only with the political triumph of the Third Estate that, as Marx put it, classical political economy made the switch to "vulgar political economy" and took up the role of hired prizefighters for big capital. But many strands of this earlier, revolutionary free market liberalism have survived into the present: the American individualist anarchists, obviously; the Georgists, and the Georgist-tinged libertarianism of Albert Nock; and the left-wing Rothbardians.

At the same time, it was only in the late Nineteenth Century that socialism came to be conventionally associated with state ownership and central planning, so that Mises could later take these as its defining characteristics. And by the turn of the Twentieth Century, many adherents of the cooperativist and market socialist traditions were conceding the term "socialism" to the state socialists for the sake of avoiding confusion; the Tucker circle, for example, largely ceased to self-identify as socialist after 1900, and for the most part used the term in its statist sense. But not all of us in this tradition have conceded "socialism" to the statists and collectivists, either.